Taxpayer Says Newark Fraud Went Unchecked

NEWARK, N.J. (CN) – Newark Mayor Cory Booker failed to investigate a fraud committed by a former deputy mayor who used public funds for personal gain, a company claims in court. The complaint in Essex County Superior Court takes aim at the alleged fraud and violation of anti-racketeering law committed by Newark’s former deputy mayor Alfred Faiella who reportedly had a quarter-century reign as executive director of the Newark Economic Development Corporation, or NEDC. Faiella left office in 2001 and subsequently filed for bankruptcy shortly thereafter. As a taxpayer, Kennebec GEP LLC says it “has been damaged by the theft of assets and revenue from the city of Newark.” It seeks punitive damages from Faiella, Booker, six corporations and two other individuals. “Beginning in the 1980’s, Alfred Faiella began to create corporations as instruments of commerce to effectuate the ongoing financial enterprise of diverting and converting the assets and revenue of the Newark Economic Development Council from the City of Newark and its taxpayers,” the complaint states. Those companies were NEDC Financial Management and several for-profit affiliates, Kennebec claims. “The assets of the corporate defendants were acquired through the use of public funds obtained by the NEDC from federal, state, and local public sources,” according to the complaint. “The corporate defendants also developed projects for the city of Newark. “These projects were developed through the use of public funds from federal, state, and local public sources.” “In or around 1988, Faiella amended the certificates of incorporation for NEDC Financial and the other affiliate companies, effectively severing them from the NEDC.” Faiella and the companies “generated millions of dollars” from the projects and assets, and continue to do so, Kennebec adds. The taxpayer also accuses Faiella of using “his influence and contacts with the city of Newark to acquire lots owned by the city at well-below market value.” Faiella’s wife, Randy Faiella, and another woman, Joanne Harz, allegedly helped him “to acquire the lots so that his name and the corporate defendants’ names would not appear on the deeds to the lots.” “Faiella, his wife, and Harz would purchase these lots from the City of Newark for very little money and resell the lots at a great profit,” the complaint states. “None of the profit has been accounted for and none of it was given to the city of Newark or its taxpayers.” (32) Though Mayor Booker allegedly vowed to investigate Faiella’s actions with regard to the NEDC and the corporate defendants, he has dropped the ball, Kennebec claims. “Rather than hold Faiella accountable for his actions, Booker has permitted Faiella to retain control of some corporate defendants by entering into a transfer and release agreement with Faiella and the corporate defendants,” the complaint states. This agreement “expressly allows Faiella and the corporate defendants to retain $350,000,” Kennebec claims. It “does not require any payments from Faiella,” and “also fails to expressly state how much money the corporate defendants are to return to the city of Newark,” the complaint continues. The agreement only “vaguely requires the corporate defendants to turn over unspecified amounts in their bank accounts,” Kennebec adds. Booker allegedly signed the agreement after the city council approved it in July 2009. “Booker abused his discretion in signing the Agreement, which was not in the interest of the taxpayers and residents of the City of Newark,” Kennebec claims. Kennebec also says “Booker has failed to make Faiella account for the income wrongfully received by both Faiella personally and the corporate defendants.” “Booker has inexplicably permitted Faiella to retain control of some of the corporate defendants and continue to generate income from assets stolen from the city of Newark,” the complaint also states. Booker, who has served as mayor of Newark since 2006, is the Democratic nominee for the U.S. Senate seat that vacated earlier this year by the late Frank Lautenberg. The special election is set to take place in October. His office did not return a call seeking comment. The complaint alleges conversion, fraud and N.J. RICO. Kennebec is represented by Edward Grossi of Montclair.